Renovation Loans in San Diego: How a HomeStyle Mortgage Pays for Repairs

by Trevor Landress

A renovation loan lets you buy a home and finance repairs or upgrades in a single mortgage. Fannie Mae's version is called HomeStyle Renovation, and it holds the repair money in an escrow account that is released as the work gets done.

The short answer

HomeStyle Renovation combines the purchase and the renovation in one Fannie Mae mortgage.
Eligible work includes repairs, accessory dwelling units and landscaping, and there is no minimum dollar amount.
Renovation money goes into an escrow account for your benefit and is released after work is completed and inspected.
The lender cannot raise the loan to cover cost overruns, so plan a cushion of your own.

What a HomeStyle loan is

Fannie Mae describes HomeStyle Renovation as a way to buy a fixer-upper, or refinance and remodel, with a single loan. Its product page says eligible work includes repairs and restoration such as roofing, plumbing and painting, accessory dwelling units such as in-law suites, and landscaping such as retaining walls and patios. There is no minimum dollar amount, and the work can touch any part of the home.

I am not a lender, and loan programs vary by lender and change often. This is a general overview of the rules as Fannie Mae publishes them, and your lender decides what you qualify for.

Who does the work

A contractor is not always required. Fannie Mae says you may choose your own contractor, subject to the lender's review. On a one-unit property, you may also do part of the work yourself, but the do-it-yourself portion cannot exceed 10% of the as-completed value. The lender must approve the plans in advance and inspect any item costing more than $5,000.

For a San Diego buyer who wants to add a unit, the fact that an accessory dwelling unit can qualify is worth asking a lender about. My guide to ADUs in San Diego covers the local rules and costs before you plan the loan.

The renovation escrow account

The Selling Guide's section on costs and escrow accounts (B5-3.2-04, dated December 10, 2025 when I checked it) says the renovation costs, any contingency reserve and any funds you provide must be deposited into an escrow account for your benefit. Costs are based on the plans, specifications and contractor bids for all requested work.

At closing, the lender may make an initial draw of up to 50% of planned costs, and part of it can cover permits and architect fees.
Contingency reserve: not required on one-unit properties, though the lender may set one. On two- to four-unit properties, 10% of repair and renovation costs is required, and the lender may raise it to 15%.
If you cannot live in the home during the work, costs may include up to six months of mortgage payments.

How the money is released

Funds are released only after the specific work is completed, following the agreed schedule, and after a specific request. The allowed methods are a check issued jointly to you and the contractor, or a wire to the contractor after you give written consent before each disbursement. The consent must state your name, the property address, the amount, the contractor and the date.

The lender checks progress with periodic inspections before more draws are issued. When the work is certified complete, unused funds, other than those you provided, reduce the loan balance, with a limited exception for additional improvements.

The cost overrun rule

Fannie Mae says the lender may not increase the loan amount to cover cost overruns. Any increase must be funded by you or the lender without affecting Fannie Mae's lien priority. That is the reason to ask your contractor for firm bids and to keep your own cash cushion.

Where renovation financing fits in a purchase

A renovation loan changes the timeline, because the lender needs plans, bids and approvals before closing, and the appraisal considers the planned work. If you are in a competitive situation, that extra paperwork matters, so talk to your lender and agent early. My guide on how to win a multiple offer situation explains how the strength of an offer is judged.

Renovation costs can also change how you think about your monthly payment and your cash needs, so compare the combined loan to the other ways to buy a home that needs work. If the seller is giving you a credit toward closing costs, remember the limits in my seller credits guide. A home warranty will not pay for planned upgrades, and the costs of the loan itself will appear on the forms I describe in my Loan Estimate guide.

My advice for San Diego buyers

Ask a lender early if they offer HomeStyle Renovation, since not every lender does.
Get written bids from licensed contractors before you write your offer.
Plan a cash cushion for overruns, because the loan amount cannot be raised for them.
Check permit requirements for the work with the City or County before you commit.
Ask how and when draws are released, and how long the inspections take.

A note on advice

I am a REALTOR®, not a lender, attorney, tax professional or financial advisor, so this guide is general information. Your lender can tell you what you qualify for, and a CPA or attorney can answer tax and legal questions.

Call or text me at (619) 402-4614 or send me a message.

Call or text (619) 402-4614 Contact Trevor Landress

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Frequently asked questions

What is a HomeStyle renovation loan?

It is a Fannie Mae mortgage that finances both the purchase of a home and its renovation in a single loan.

What work can a renovation loan pay for?

Fannie Mae lists repairs and restoration, accessory dwelling units and landscaping, with no minimum dollar amount.

How is renovation money paid out?

It sits in an escrow account for your benefit and is released after specific work is completed, using a joint check to you and the contractor or a wire with your written consent.

Can the lender increase the loan if the work costs more?

No. Fannie Mae says the lender may not increase the loan amount to cover cost overruns.

Can I do some of the work myself?

On a one-unit property you may, but do-it-yourself work cannot exceed 10% of the as-completed value.

About the author

Trevor Landress is a San Diego REALTOR® with Coldwell Banker West (DRE# 02126901). He was born and raised in San Diego and has been licensed since 2021.

Trevor helps homeowners sell, guides first-time buyers through the home buying process and assists investors with their next acquisition. His work includes negotiating offers, analyzing market trends, building pricing strategies and running marketing campaigns for his listings.

He serves clients across San Diego County, from coastal communities like La Jolla, Del Mar and Carlsbad to neighborhoods inland.

Trevor is part of the Campbell Group, a three-generation real estate team, and he and the Campbell Group consistently rank as a top producing team at Coldwell Banker West each month. He writes these guides to help San Diego buyers and sellers navigate an ever-changing market. To talk through your plans, call or text (619) 402-4614 or contact Trevor Landress.

How I help San Diego home buyers

I help buyers sort out their budget, understand their loan options with a lender, search for homes, write and negotiate offers, keep track of inspection and contingency deadlines and stay organized through closing.

How I help San Diego home sellers

I help sellers price their home, prepare it for the market, market it to buyers, review and negotiate offers and manage the steps from an accepted offer to closing.